As you enter the holiday season and a time of family gatherings, I wanted to share some thoughts with you more about family and less about business. A lot of these concepts are from the book, Beating the Midas Curse by Perry Cochell and Rod Zeeb. The book does a nice job of describing a foundational component to a lot of our work with family business owners and their families; namely shared values and their application in long-term planning for your business and your family.

The premise of the book is for you to think about what really matters when it comes to family planning. It relates to the Greek mythology figure King Midas. In short, King Midas was granted any wish he wanted. Since he so much loved gold and new what unlimited quantities would mean for him and his kingdom, he wished that everything he touched would turn to gold. Unfortunately, one day is beloved and cherished daughter jumped in his lap…and she turned to gold. The king was able to get his wish, now a curse, reversed. He then gave away all his possessions and lived a miserly life, but was truly happy.

A historical lesson of the book is that for thousands and thousands of years, families have been unable to maintain wealth in their family through multiple generations. Statistically, only 10% of families are able to maintain their wealth through the 3rd generation. In other words, 90% of families are unable to keep wealth that is passed on to them. Instead of focusing on what 90% of the families that do lose their wealth, the authors focus on what the 10% of families do to maintain their wealth.

Financial planning protects and grows your assets. Estate planning prepares your assets for an orderly transfer to your family. These are two very important parts of a 3-legged stool. However, the third leg is often missing…the part that prepares your family for the inheritance of these assets. Without three legs to support it, the stool eventually falls over. The same applies to family planning. Without the third leg of the family wealth stool, the family wealth is lost.

“The best tax and estate planning cannot make up for an unprepared heir.”

The authors define this third leg of the stool as “heritage planning”. In its simplest form, financial and estate planning pass “what you own” to future generations. This is the basis of your family’s financial inheritance. Heritage planning passes “who you are” and your values to future generations. This is the basis of your family’s emotional inheritance.

From extensive surveys of tens of thousands of families, the four outcomes that matter most to people are expressions of the heart and mind, not the actual money. I would venture a guess that you generally agree with these as well.

1. Protecting your family from ever being destitute, 2. Providing your family with opportunities to be healthy productive adults, 3. To NOT promote a non-working lifestyle and 4. To create a culture of communication and strong relationships.

While traditional financial and estate planning are important, alone they do not do much to address these four desired outcomes. Passing along your family’s true wealth; namely its traditions, values, stories, life lessons and experiences are key to helping ensure that your family is one of the 10% of families that learn to manage the material wealth of the family so that it last beyond the 3rd generation. In turn, the family wealth is not the object of inheritance, but instead becomes a tool to help secure what matters most.

Do you want your great-grandchildren to know your first name and what mattered most to you?

Here something to think about as you enter the next several weeks and think about your family gatherings.